Cantillon

Penny has yet to drop for auditors:PricewaterhouseCoopers got a slap on the wrist from the US audit regulator this week.

The Public Company Accounting Oversight Board said the firm “may not be applying an appropriate level of professional scepticism in subjective areas susceptible to management bias”.

Interestingly the criticisms were contained in a report prepared in 2010 but only released this week.

The US body has a policy of only naming firms if it decides they have not taken sufficient steps to remedy problems in the 12 months following the publication of an annual report detailing failings but not naming the firms in question.

The report has no legal implications for PwC but is obviously embarrassing and the firm told the New York Times that the issues “relate to some of the most complex, judgmental and evolving areas of auditing” and said it was committed to improving its work.

This is the latest in a series of similar criticisms of auditors, the most recent being the UK Competition Commission report last month which found that auditors are unduly focused on the needs of the management that hire them rather than the shareholders who ultimately pay them.

Prior to that, a report, issued by a Canadian regulator, that looked at audit firm inspection results from Canada, Britain, the United States and Australia, concluded that the most common problem found was that “auditors are too often accepting or attempting to validate management evidence and representations without sufficient challenge and independent corroboration”, according to the New York Times.

The question for the profession is fast becoming how many times does it have to be told before it accepts it has a problem?

Up close and personal with Merkel

When Christine Lagarde walks in the room, men melt. When Angela Merkel walks in, buttocks clench. That, at least, is the received wisdom.

As International Women’s Day passes for another year, it’s worth considering how these two women wield power in very different ways.

Ask anyone who watches IMF chief Christine Lagarde on a regular basis and you will hear adjectives like intelligent, charming, tough but fair. Angela Merkel rarely gets such love letters.

So what if Lagarde and Merkel did a job swap? Would Angela Merkel be an effective IMF head, prowling the world and dispensing “must try harder” grades to loan recipients on their quarterly report cards? Could Chancellor Lagarde use her charm to defuse resentment of Germany in Ireland and winkle out of taxpayers the final controversial bond and loan repayments?

Put another way: how far have public perceptions of these two powerful women influence perceptions of Berlin and the IMF in bailout-era Ireland? And do subjective views of personal style influence perception of political substance?

At the World Economic Summit in Davos, Christine Lagarde used humour and rhetoric to win over a high-powered audience. Angela Merkel garnered perfunctory applause with a workmanlike address of largely recycled messages.

The curious thing is that anyone who has met Angela Merkel in private now she can be just as charming and witty as Christine Lagarde. So why does she never let it show?

Some confidantes suggest she is a naturally cautious person, coloured by her East German socialisation where a poker face was always a good public mask.

And is charm essential to getting the job done in politics – or at least creating that impression? Despite the negative anecdotal evidence against her, polls show that two-thirds of Germans think Merkel is doing a good job. She remains the most respected EU leader, too, according to a poll conducted last year in eight EU countries by the well-respected Pew Research Centre.

So should Merkel continue doing her thing or would it be worthwhile taking a leaf out of Lagarde’s charm manual to boost perceptions in Ireland of the German leader and German interests?

A visit by Merkel to Ireland would be an opportunity to find out.

But for that, her confidantes say, she has to invited first.

Half a millennium ago Machiavelli urged would-be political princes that they can “never be secure against disaffected people, their number being too great”. A visit to Ireland would be a chance to see if this, too, is the logic of Merkiavellian princesses.

Nualláin tackles pensions regulator

TodayGrafton’s finance director Colm Ó Nualláin is not known for impetuous outbursts. So when he decides to criticise the Pensions Board in public, it’s worth listening. On Thursday, as the building materials group reported a trebling of profits, Ó Nualláin (right) accused the pensions regulator of setting rules on calculating retirement benefits that were effectively forcing companies to ditch defined benefit (final salary) schemes.

Grafton’s headline profits may look good but the group is battling rapidly mounting deficits in its pension schemes. Liabilities increased by €44 million last year and now stand at close to €63 million. The group said it is in talks with staff and unions to find a solution acceptable to the regulator.

If previous experience among the large majority of private sector companies nursing losses in the defined benefit schemes is anything to go by, that will almost certainly mean cuts in benefits.

Just a fortnight ago, Independent News Media proposed halving the benefits for members of its pension schemes. The alternative, it said, was winding them up – a scenario that would see those yet to retire receive little or nothing in retirement income.

Of course, the Government will shrug its shoulders and say it cannot influence the rules but, as we have discovered time and again in recent months – not least in this week’s dragging of the previously untouchable NTMA staff into the net of Croke Park pay cuts – the Government is quite capable of changing the inviolable when it suits, or having it changed.

Given the great play it is making of its jobs initiative, and its stated determination to ease the harsh tonic of austerity, it seems incongruous that Government should at the same time stand over a regime that is effectively impoverishing thousands of workers – most of whom will have no chance to recoup their losses.

And all of this as it pats itself on the back over a hard-fought public sector pay deal that leaves unsustainable public service pensions untouched.

Just a fraction of the reform that has had to be swallowed by private sector pensioners would have yielded far more than the €1 billion over which the Government is congratulating itself.

Number of the day:236,000 Numbers of jobs added to the US economy last month, well ahead of forecasts

Quote of the day:The determination shown in actually implementing a programme has been extraordinary
IMF managing director Christine Lagarde in Dublin